Keeping business booming as rates rise

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Unlike the risky subprime mortgages before the financial crisis, these new products have stricter regulations and are under a different name.

With mortgage rates rising, there looks to be tough sledding ahead for traditional agency loans. But there are still plenty of borrowers out there according to Will Fisher, senior vice president of sales and marketing at Citadel Servicing Corp. – you just have to have the right product.

Fisher said that much of the chatter at this year’s Mortgage Bankers Association conference was that non-prime is the play if originators want to survive.

“It wasn’t as well attended; it was like a ghost town in the vendor area,” he said. “Everybody’s talking about needing to change their model or sell their business. They need to focus on non-prime.”

The important thing, Fisher said, is for originators to partner with the right lender. That can be a challenge with so many new players entering the space as rates continue to rise.

“There are a lot of folks cramming into the non-QM market right now who think it’s like the early 2000s subprime, and it’s not, so they’re stubbing their toes,” Fisher said. “The trick is to partner with a lender who’s been in the arena for years, like CSC – who can guide you through the space.”

Originators who partner with the right lender will find that there’s still plenty of demand for mortgages, Fisher said.

“There are plenty of borrowers out there for this paper – and not just 500-credit-score borrowers. We’re talking about self-employed borrowers who can document the ability to pay these loans back. You just have to relearn a few things. Underwriting these loans is a real process. It’s not just ‘point A to point B’ – although a lot of people think it is. You’ve really got to consider, ‘Okay, what’s this person do for a living? Does it make sense per the desired loan amount and down payment? How much money does he have in the bank?’ Citadel Servicing is experienced in reviewing these intricacies, and it is why the performance on our paper is so good.”

Fisher said that CSC’s rock-solid underwriting standards result in loans that are beneficial and safe for all parties involved.

“A few correspondent sellers think we’re tough, and some brokers think we’re difficult,” he said. “I’m okay with that, because we know at the end of the day that we’re making a loan that’s good for the borrower, good for the broker, and it’s good for the us. It’s not going to put them in harm’s way. The smart companies understand that. The fly-by-nighters do not.”